Specialty chemicals for the oil service industry.

 Penny stocks have a bad reputation but it may all be relative to context. Take the recent years where many stocks were pummeled mercilessly due to the credit crunch but had been able to survive the storm and also were able to adjust their books to jump-start growth. Add into the mix that some of these cheap stocks belong to companies that operate within industries with good fundamentals and you have Flotek industries, Inc. 

Although it is true that the vague definition of a penny stock is validated when the price per share hovers around the $1 value or less, many consider any stock under $5 one of these. And plenty of these stocks stay that way and never recover. In the case of FTK however, we could be looking at a micro company who was caught bad by the crunch -and later the recession- and used this time to transform its business model, clean house, rework its capital structure and is now ready for a rebirth. 

The company has been posting improvements for the last 4 quarters. Even when these come from very depressed levels it is worth mentioning that in their last conference call, last week, they announced they have reached positive EBITDA for the first time in years, have increased their cash position and have set yet another quarterly increase in  revenues… their 4th consecutive one. After hittting a low of 23.50 million in sales for the quarter ending in June 2009, sales have been trending higher each subsequent quarter (23.80 mill, 24.60 mill, 28.40 mill and 31.50 for the most recent quarter). Most notably, the company said increased sales were due in part to their newfound ability to  raise prices, a fact that bodes well for the second half of this year. Meanwhile, they suggested one time expenses will greatly diminish going forward, a change that might possibly put the company in the black before years’ end. 

In the land of microcaps FTK is poised for better growth in coming quarters.

Aiding to their cash position, FTK is supposed to receive soon a refund check from the IRS for 7.1 mill, part of which will be used to reduce senior debt. Flotek is a global technology-driven growth company that provides oilfield products, services and equipment to the oil, gas, and mining industries. Operations are based in both domestic (Gulf Coast, Southwest, Rocky Mountain, Northeastern and Mid-Continental regions of the United States) and international (Canada, Mexico, Central America, South America, Europe, Africa and Asia) markets. Products and services are actively marketed in over 20 countries worldwide. They have just announced their business is growing internationally, specially in Canada, Turkey and Saudi Arabia and last but not least, some of the products being offered by their chemicals division -microemulsions, surfactants that intend to reduce permeability impairment and improve load recovery in natural gas and oil exploration- appear to be “environmentally friendly” for the fracking of natural gas shales. How timely!

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